75 companies have debt of Rs2.24 lakh crore: Petitioners
As many as 34 power companies have accumulated Rs 1.4 lakh crore of NPA for Indian banks while 41 corporates across sectors, including those from infrastructure, textile, telecom, sugar, steel, energy, power and fertilisers have Rs 84,000 crore piled up NPAs which have taken the bad loan total to astronomical Rs 2.24 lakh crore, petitioners opposing RBI's February 12 circular on resolutions of debts have submitted to the Supreme Court.
 
Quoting a report of the 37th Standing Committee on energy giving NPA details of 34 power plants, the petitioners said these plants which have number of banks ranging from 2-19, have accumulated over Rs 1.40 lakh crore . The power companies are seeking Supreme Court intervention in setting aside or quashing an RBI order of February 12 last year where the apex bank laid down strict norms for NPA resolutions within 180-days among other rules. 
 
"75 companies have a debt of Rs 2.24 lakh crore", the petitioners stated. The RBI has already contested the claims of these corporates's petitions saying 180 days is a reasonable period for achieving implementation of Resolution plan.
 
Power, shipping and sugar companies have challenged the Reserve Bank of India's (RBI) February 12 circular which has identified about 30 companies, which have loans over Rs 2,000 crore and are stressed. Many of them were power companies and they have already challenged the RBI's circular in various courts. 
 
Earlier this month RBI defended the February 12 circular, telling the SC that intention behind the circular was to give banks more powers in resolving stress and the 1-day default rule is to ensure banks & borrowers put a risk management framework in place. SC has reserved its verdict. 
 
The 1-day default rule of RBI states if a deafulter fails to pay even 1 day after the deadline of loan payment, then banks have to come up with a resolution plans and, if they don't, approve the resoluion plan within 180-days, then the banks will have to take the company to insolvency. This rule was mostly criticised by companies.
 
The prominent corporates where payments are due are Adani Power Maharashtra (Rs 9,463.29 crore), Damodar Valley Corpora (Rs 9,756.42 crore), Jaiprakash Power Ventures (Rs 8,719.16 crore), KSK Mahanadi Power Company (Rs 14,165.12 crore), Jindal Thermal Power (Rs 5,594.21 crore), Prayagraj Power Generation (Rs 9,883.28 crore), Jaiprakash Power Ventures (Rs 8,719.16 crore), GNR Chhatishgarh Energy (Rs 5,325.28 crore) and DB Power (Rs 5,930.56 crore) among a host of others. 
 
Among the consolidated NPA list of other corporates VOVL, an oil company having a 17-bank consortium of lenders owes Rs 21,657.54 crore to them. Matrix Fertiliser and Chemicals owes 11 bankers Rs 4135.12 crore. Essar Bulk Terminal, an infra company owes Rs 1,088.82 crore and Rolta India has a debt of Rs 3,400 crore. 
 
The new framework of RBI prescribed a strict 180-day timeline over which banks are required to unanimously agree on the resolution plan, failing which the stressed account would have to be referred for resolution under the Insolvency and Bankruptcy Code (IBC).
 
Power companies argued that the circular would push even power assets that were close to achieving loan restructuring in to insolvency.
 
Power ministry officials also spoke out against the February 12 circular seeking some relaxation in norms, especially with respect to the one-day default rule, attributing the stress in the sector to delayed payments by electricity distribution companies of India (discoms), lack of power purchase agreements and irregular coal supply.
 
Disclaimer: Information, facts or opinions expressed in this news article are presented as sourced from IANS and do not reflect views of Moneylife and hence Moneylife is not responsible or liable for the same. As a source and news provider, IANS is responsible for accuracy, completeness, suitability and validity of any information in this article.
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    NPA recovery target in jeopardy on Essar Steel
    The delay in actual realisation from the resolution of the big-ticket cases like Essar Steel has put the non-performing assets (NPAs), or bad loans, recovery target by banks of Rs 1.8 lakh crore in jeopardy.
     
    A section of the Finance Ministry, however, believes the target of Rs 1.8 lakh crore could be deemed to have been achieved as the decision of National Company Law Tribunal (NCLT) on the sale of the Essar company to ArcelorMittal for Rs 42,000 crore was taken in the current fiscal.
     
    A senior ministry source said the public sector banks (PSBs) have recovered close to Rs 1.33 lakh crore by the third week of March, leaving a gap of Rs 47,000 crore in meeting this year's target.
     
    The achievement of Rs 1.8 lakh crore mainly depended on the resolution of the Essar Steel insolvency case before March 31, which has happend, but the distribution of the funds to financial creditors has not taken place as operational creditors have taken up the issue of their dues in the appellate tribunal (NCLAT).
     
    Earlier NCLAT had directed the Essar Steel Committee of Creditors (CoC) to reconsider the distribution of Rs 42,000 crore as announced by NCLT Ahmedabad, which had suggested a 85:15 distribution between the financial and operational creditors against the 90:10 ratio as proposed in the resolution plan.
     
    The NCLAT was informed last week that a decision by CoC on the issue of whether StanChart, an unsecured financial creditor which had moved the NCLAT against the resolution distribution formulae, should get higher a payout for its dues from Essar Steel, is being discussed. The next hearing on the matter at NCLAT has been adjourned to April 9.
     
    Unsecured lender Standard Chartered Bank, which had made the highest claim of Rs 3,400 crore, has been excluded from the offer. As per the plan submitted by ArcelorMittal, the bank will receive only 1.7 per cent, or Rs 60 crore, of its dues.
     
    The total of claims admitted by the financial creditors in Essar Steel and Bhushan Power & Steel, the two big-ticket cases of the RBI's first 12 list of NPAs, are Rs 49,479 crore and Rs 47,145 crore, respectively.
     
    Earlier this month, NCLAT directed NCLT to decide on JSW's bid for Bhushan Power & Steel by March 31 after dismissing the plea of Tata Steel. But this case also has not moved further and, so far, no decision has come from NCLT.
     
    This has raised worries about the recovery from this case being pushed to the next financial year.
     
    Earlier, the Department of Financial services officials had met the senior management of PSBs via video conferencing and reviewed the recovery target for 2018-19. The meeting discussed the recoveries made by PSBs through the Debt Recovery Tribunals (DRTs) and the SARFAESI (Securitisation and Reconstruction of Financial Assets and Enforcement of Securities Interest Act), along with a presentation on the Insolvency and Bankruptcy Code by the Corporate Affairs Ministry. But the recoveries through SARFAESI and DBTs are not huge.
     
    A Boston Consulting Group and Indian Banks' Association joint report says that PSBs have recovered a total of Rs 2.87 lakh crore between April 2014 and December 2018. They have recovered close to Rs 80,000 crore from cases resolved under the Insolvency and Bankruptcy Code.
     
    Disclaimer: Information, facts or opinions expressed in this news article are presented as sourced from IANS and do not reflect views of Moneylife and hence Moneylife is not responsible or liable for the same. As a source and news provider, IANS is responsible for accuracy, completeness, suitability and validity of any information in this article.
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    Inter-Creditor pact a non-starter: Debtors to SC
    Corporates opposing the RBI's February 12 circular on loans resolutions have submitted to the Supreme Court that the Inter-Creditor Agreement (ICA) among banks as a possible debt resolution framework has failed to take off as the relevant institutions like LIC, HUDCO, IFCI, IIFCL, NIACL, SIDBI, GIC are not signatory to it.
     
    The companies have slammed the slow progress of the inter-creditor arrangement among the banks saying it is a non-starter due to the absence of relevant members even though the Reserve Bank of India (RBI) has endorsed its utility. 
     
    The ICA is seen as helping the debt defaulters to avoid bankruptcy proceedings and a possible debt resolution mechanism.
     
    The ICA is a non-starter because 49 out of 85 lenders (that is 58 per cent) have so far not signed the agreement even after the expiry of eight months, and 10 of the non signatories are government-owned financial institutions and major lenders in the Infrastructure sector -- LIC, HUDCO, IFCI, IIFCL, NIACL, SIDBI, GIC, the pleaders' their submission stated.
     
    "None of the Non Banking Financial Companies/Asset Reconstruction Companies (NBFCs/ARCs) are party to the ICA, without whom the agreement mechanism will not be effective," the companies further added.
     
    The petitioners said: "In its written submission, the RBI has endorsed the ICA as a possible debt resolution mechanism in its submissions to the Supreme Court, since it is aimed at helping debt defaulters to avoid bankruptcy proceedings and requires only 66 per cent approval of lenders."
     
    Indian banks, who are trying to sell their troubled assets are part of the ICA. 
     
    A group of banks, including public sector, private sector and foreign banks, signed an inter-creditor agreement in 2018 to push for the speedy resolution of non-performing loans on their balance sheets as per which a majority representing two-thirds of the loans within a consortium of lenders should now be sufficient to override any objection to the resolution process coming from dissenting lenders. 
     
    Under ICA, minority lenders who suspect they are being short-changed by other lenders can now either sell their assets at a discount to a willing buyer or buy out loans from other lenders at a premium. 
     
    The inter-creditor agreement is aimed at the resolution of loan accounts with a size of Rs 50 crore, anything above that are under the control of a group of lenders. 
     
    It is part of the broader "Sashakt" plan approved by the government to address the problem of resolving bad loans. 
     
    ICA Chairman Sunil Mehta is of the opinion that disagreement between joint lenders is the biggest problem in resolving stressed assets. Many debters and lenders believe that the holdout problem, where the objections of a few lenders prevent a settlement between the majority lenders, will be solved through the inter-creditor agreement.
     
    Such an agreement may persuade banks to embark more quickly on a resolution plan for stressed assets. This is an improvement on the earlier model, which relied solely on the joint lenders' forum to arrive at a consensus among creditors. 
     
    However, the companies approaching Supreme Court against the February 12 Circular on loan resolutions said this alternate mechanism is not taking off.
     
    Indian banks have been forced by the RBI to recognise troubled assets on their books, but their resolution has remained a challenge. 
     
    Supreme Court has heard a bunch of petitions across the sectors -- Power, Ship-building, Sugar, Telecom -- opposing the RBI's February circular. 
     
    A two-judge bench of Justice Rohinton Fali Nariman and Justice Vineet Saran is hearing a bunch of petitions moved by power, sugar, and ship- building companies challenging the RBI's circular. 
     
    On February 12, 2018, the RBI had asked banks and other lenders to either execute a resolution plan for big stressed accounts or file insolvency petitions against them in the National Company Law Tribunal (NCLT).
     
    Disclaimer: Information, facts or opinions expressed in this news article are presented as sourced from IANS and do not reflect views of Moneylife and hence Moneylife is not responsible or liable for the same. As a source and news provider, IANS is responsible for accuracy, completeness, suitability and validity of any information in this article.
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